The unspoken benefits of tax avoidance

Evidence shows corporate tax avoidance isn't the huge issue we thought it was, so perhaps the G20's real gripe is that they're being forced to compete for the affections of multinationals. That could actually be a good thing, writes Chris Berg.

Few things excite a treasurer more than tax avoidance.

The idea conjures up fantasies of great pots of untaxed money - money the government is morally entitled to but for one reason or another (the weakness of previous administrations, probably) is being denied.

No surprise then, as his budget savings fade away into nothingness, Joe Hockey has turned his mind to the old corporate tax avoidance chestnut.

On the weekend in Cairns the G20 finance ministers agreed to tackle "base erosion and profit shifting ... to make sure companies pay their fair share in tax". Our very own Hockey, as G20 host, is leading the charge.

Profit shifting refers to the fear that multinational firms are structuring themselves to route profits through lower-taxing countries.

Base erosion is the fear that this profit shifting is eroding the tax base, starving governments of funds.

The Organisation for Economic Co-operation and Development (OECD) started focusing on base erosion and profit shifting last year, pushing it to the front of the G20's agenda.

They've been amply backed up by breathless newspaper stories about the complex tax structures of firms like Apple that have divisions in Ireland and the Netherlands.

All very interesting except for one thing. The profit shifting problem isn't that much of a problem.

It's true that in the 1990s, when economists and policymakers first turned their mind to how multinational firms plan their tax liabilities, they looked at aggregate country-level data and concluded (as one of the first major studies said) "companies locate a sizable fraction of their foreign activity in tax havens".

This early work implied profit shifting was both real and substantial.

But now economists are working with more fine-grained data specifying how firms structure their internal debt around global affiliates. And as they look closer at those affiliates, the evidence is telling a very different story.

A 2014 overview of the empirical literature by one of the major scholars of global tax avoidance, Dhammika Dharmapala, concludes "in the more recent empirical literature, which uses new and richer sources of data, the estimated magnitude of (base erosion and profit shifting) is typically much smaller than that found in earlier studies".

There is even, as Dharmapala points out, some evidence to suggest profit shifting has been declining in the last decade, not increasing.

We're now talking about multinational corporations shifting somewhere between 2 per cent and 4 per cent of their profits to tax havens.

Two to 4 per cent is not nothing, of course.

But these lower numbers help resolve the big profit shifting puzzle. If the corporate tax base is being eroded, then why is revenue from corporate tax going up?

Between 1965 and 2007 corporate income tax revenue increased from 2.2 per cent of GDP to 3.8 per cent of GDP in OECD countries. (Revenue fell somewhat during the Global Financial Crisis but is on the rebound.) This despite the fact that corporate tax rates have been lowered over the last 40 years.

Even the OECD, in its 2013 paper Addressing Base Erosion and Profit Shifting, thinks the stability of corporate tax revenue is a bit odd (see here, page 16).

Perhaps the answer is simple: profit shifting isn't as big a deal as newspapers and treasurers think.

At least, if nothing else, those facts ought to engender some scepticism about whether there really is a profit shifting crisis. Let alone one that requires urgent, internationally coordinated action.

So where is that scepticism?

We've seen how quickly commentators look for self-interested political motivations behind government pronouncements on national security and foreign policy. This is healthy. But all that valuable distrust seems to disappear when we talk about crackdowns on corporate tax - a field where political self-interest is blindingly obvious.

Like many other countries, Australia has a general anti-avoidance rule, a catch-all law that allows a court to override any scheme it believes is designed primarily to produce a tax advantage.

Our anti-avoidance rule is incredibly broad and creates enormous uncertainty. But it is also extremely powerful. If there was really a tax avoidance problem in Australia the authorities would be well equipped to handle it.

Multinational corporations have to make choices when deciding where they should base themselves. Different countries have different labour costs, workforce skills, levels of infrastructure, protection of the rule of law, and, of course, different tax rates.

The G20's real gripe is that they are being forced to compete for the tax affections of the world's biggest companies.

You can understand why the treasurers of the world think tax competition is harmful. They want to maximise their government's revenue.

It's not obvious why we should share their concern.

At the end of the day, consumers and workers benefit when corporate tax rates are low and attractive. Anything that pressures our governments to keep those rates low is a good thing.

Chris Berg is Policy Director at the Institute of Public Affairs. Follow him at twitter.com/chrisberg. View his full profile here.

godbothered:

23 Sep 2014 10:15:30am

gbe,

"Yes and when you think of the labor governments over the years that you would have expected to address this issue you are left wondering if there is an issue at all".

I seem to recall the previous Labor government attempting to get more tax out of multinationals, but they were thwarted by the screeching Henny Penny corporate types from the mining and dirty energy industries, shamelessly supported by anti-society cheer leaders such as you.

RayS:

23 Sep 2014 7:59:02pm

Perhaps Chris Berg can explain why the big mining companies were making big profits until the mining super profits tax came into effect, whereupon the profits were suddenly below the level at which a super profits tax starts to earn, although all the tax offsets for exploration related expenses were still, amazingly, able to be claimed by companies which had suddenly forgotten where they put their previous profits.

Then there was the deal negotiated with Gillard to restrict the super profits tax to iron ore and coal. Suddenly, profits on iron ore and coal were missing in action, but profits on other minerals were mysteriously up.

Maybe Chris Berg needs to admit he works for a business propagandist organization and is strong on convenient opinion but weak on facts.

Tony:

Well said. Until the Institute of Public Affairs is upfront about who funds it and what outcomes it is supposed to achieve from that funding, we have a right to question any public statements.

But I commend the ABC for their sense of humour in publishing this amusing faux justification of tax avoidance by transnational companies. I mean no one could actually take this seriously, could they? I suspect that the folks at IPA must be chortling at how the national broadcaster just published an article promoting corporate tax avoidance as good for the economy. Yep. Hard to believe.

the yank:

23 Sep 2014 10:20:57am

Boom to Bust, the alarm is sounded about an Australian housing bubble.

The thesis can be boiled down to the number nine ? the ratio of home prices to income in Sydney. The multiple compares unfavourably to 7.3 in London, 6.2 in New York and 4.4 in Tokyo (Melbourne is 8.4).

Hockey denies such a problem exists. Is Hockey's denial also Labor's fault?

burke:

23 Sep 2014 4:59:58pm

There is a built in bubble burster in house prices. If people cannot afford the price, they stop buying. The price must then decline. A small bubble may happen, but it will never become a large bubble.

pilotyoda:

23 Sep 2014 7:03:28pm

Not quite, I am afraid.Negative gearing is the straw that will burst the bubble. Already the only buyers for many properties are investors bidding against each other.With the median house prices in Melbourne over half a million $$ and median wages (NOT "Average" which seems to be around manager salary) below $50,000, owner occupiers are fast disappearing from the scene.If any government does rein in negative gearing it would probably cause a price crash (long overdue) that will severely punish property speculators, but make property more affordable for owner-occupiers, including 1st home owners.Step 1 of any adjustment is to only allow future negative gearing on new structures.Step 2 should be negative gearing will not be permitted on the sale of any property already negatively geared after that date.Existing properties negatively geared may remain so until they are sold or, say, a 5-year window, after which negative gearing should be halved and then stop altogether after 10 years.To help landlords and tenants, improvements to properties which benefit tenants, including energy efficiency, insulation, solar panels & hot water should be 100% deductible, and general improvements, including renovation, should be 50% deductible as long as the property remains rented. (At the moment, improvements are not deductible, meaning as properties age they become dumps, gradually shifting from quality rentals to cheaper rentals as the property ages.)

rattan:

Stuffed Olive:

23 Sep 2014 10:31:21am

Yes, but no government has had the guts to do something about it so it does no one credit does it. I'm disagreeing with the author Chris Berg - what say you. The underlying problem is that it is done legally while it is morally repugnant. The fact is that this avoidance has exponentially increased and the powers of corporate taxation must be completely overhauled. Our revenues are being undermined to a huge extent. Our government should do something about it because otherwise we are just being taken for suckers.

Kerry:

23 Sep 2014 3:49:10pm

What an incredible IPA analysisMuch like saying that foreign corporations such as Apple or Yahoo or Google should charge us a lot more so that by ripping money out of our economy it is somehow good for us financially.And by mining companies digging Australia's minerals to sell overseas and leaving behind holes in the ground while at the same time paying Australia a minimal amount is also soused to be good for us.Australians, suckers all, ruled by an elite for the benefit of an elite

rehabilitator:

hairy nosed wombat:

23 Sep 2014 11:04:49am

There is some truth in that, although both sides of politics around the world have been tightening laws on tax avoidance via these mechanisms. I have no doubt that there was an era of corporate tax avoidance. But my understanding is that increasingly companies in the last decade have decided increasingly it might be worth paying a little more tax for other benefits that come with operating in a more stable and otherwise more conducive environment for the secure operation of a business. There were at times big costs to business of its international tax avoidance, and as the benefits have shrunk over the last decade, the costs have started to outweigh the benefits.

But it should also be remembered this puts the lie to the central argument against the mining tax. The idea that miners where going to move offshore due to the tax was always a con. Yes, they might pay a little more tax in Australia, but they massive advantages we have in terms of stability and security over many of our competitors (not to mention their confidence in their ability to buy favourable policy decisions from both sides of politics in this country) always meant the big miners where going to stay here.

OUB :

23 Sep 2014 1:16:59pm

There was a big crackdown on tax evasion a few years back but that has always been illegal. What avoidance are you thinking of?

The RSPT was never about moving mines obviously. The issue was more about the tax killing off future investment in Australian mining due to the imposition of the second highest mining tax regime in the world. It was never a matter of a little more tax - the marginal tax rate came through at more than 58%. High much more would depend on the level of borrowings involved (interest was not an allowable deduction) and administration costs (ditto). Obviously Australia would have struggled to attract new investment under such a regime, launched with none of the promised negotiation and a complete dog's breakfast in lacking detail. Against this royalties paid were to be offset admittedly. But if you think Australia's reputation as a safe and stable place to invest survived this and the Carbon Tax unaffected you are mistaken.

burke:

23 Sep 2014 5:06:52pm

Any potential mine is subject to economic appraisal, including capital costs, royalties and income tax. If the expected return is less than can be obtained elsewhere, then elsewhere will get the investment. Australia compares unfavourably with other countries, especially when we impose a mining tax. Investment certainly moves elsewhere in such circumstances. Without a mining tax, investment opportunities improve. Investment is more likely. Just common sense.

Dr Who:

23 Sep 2014 9:33:27pm

So burke and OUB, am I to understand correctly that imposition of a mining tax will have the effect not only of diverting more money from mining multinationals currently in operation to everyone else, but that it would also provide a disincentive to new miners from doing what they usually do (coming in, stripping the topsoil, often stuffing up water tables and waterways in the process, digging out Australia's non-renewable resources as fast as possible, leaching metals out [arsenic is a popular one for gold, for example], and leaving, doing the minimal land rehabilitation job required by law, and leaving the mine site in a considerably worse state than it was, generally unfit for farming or virgin forestry, minus the resources)?

OUB :

24 Sep 2014 12:56:03pm

Longest sentence eva! Much more likely the mining companies swimming in cash (at that time) would look for resources to exploit elsewhere. It is unlikely they would have had to raise more capital in the market, thereby diverting resources from other sectors.

gregory:

23 Sep 2014 1:11:20pm

Recall everyone bleating about negative gearing and the RICH.ATO Statistics show about 1.4m people had negative geared investmentsOf those - 70% earned less than 80,000 p.ao.Hard to claim negative gearing is for the rich only based on those numbers.

tax non dodger:

23 Sep 2014 2:01:26pm

@ gregory, it is irrelevant what is the income of 'negative gearing' claimants.Given only 8% of investors build something new with this tax deductions tells us all that we need to know - it is a tax dodge that allows speculators to go into more debt than is wise.Negative gearing was supposed to alleviate the housing shortage - Big Fail.

burke:

hoop:

23 Sep 2014 8:54:41pm

Sure interest is an expense but in every other business the loss is quarantined against the business, with housing the loss is not. If I have a loan go buy Leighton shares, and they make a loss, I don't get to claim that loss on my income.

No one buys a house for investment to make money of the rent only, it's the CG they're looking for, that's speculation, not business and should be discouraged. I would agree with gearing being useful on new construction only, to encourage new supply.

Noah's Ark:

23 Sep 2014 2:07:08pm

Negative Gearing costs Australian tax payers $4billion per annum. Those 1.4 million Australians who benefit from Negative Gearing are no where near a sizeable minority of voters but they have the ear of government and also they are able to influence government policy. The pollies themselves (most of them anyway) have/are using Negative Gearing to their advantage whilst the rest of Australian voters have to supplement this highly negative arrangement on the economy.

As Saul Eslake said on the ABC last night Negative Gearing pushes up the price of housing as those who invest in Negative Gearing invest (the vast majority) in established properties and do not invest in building more housing. This creates or rather adds to the property bubble and an increase in rents not a reduction.

The numbers put out by the HIA are very dubious and nothing more than protecting their own interests. In any event the fact remains that subsidising these investors to the tune of $4billion a year and adding to the housing bubble is an OUT RAGE and needs to be dealt with. I doubt it at the moment though as politicians will always put their own personal investments and corresponding lobby groups ahead of doing the right thing by this country and its citizens.

However if there is a big enough protest from the majority then that will change the circumstances.

Susan:

23 Sep 2014 2:44:34pm

Why do people single out negative gearing with such vitriol? Providing a rental property is a business - businesses are allowed to deduct costs, including the cost of borrowing. Why should negative gearing be any different from any other business providing a goods or services to the public? Business people aren't charities - they are in business to make money. If you take negative gearing away from landlords, you really have to look at removing the tax deductibility status of ALL business expenses - then watch what happens to the economy.

The Steal:

23 Sep 2014 8:38:17pm

Susan, because its a farce and the money could be better spent elsewhere.Computer programs that factor in depreciation, travel deductions to view potential properties (holidays) and other cute little perks financed by the taxpayers. Very similar go the dodgy accounting business use to siphon public funds.Expand your property portfolio, for sure, just don't expect me to subsidize you.

Dazza:

24 Sep 2014 5:38:18am

"Why do people single out negative gearing with such vitriol?"

Because, Susan, we have 'dumb dumb Hockey' whinging about an imaginary budget emergency (which doesn't seem to exist when he is talking to New Zealanders!) and he gives us a budget that conveniently leaves out a certain measure that benefits him financially?

Namely Negative Gearing!

And he had the nerve to puff on a cigar while knowing exactly how he framed that budget to benefit himself?

Wouldn't you think people treat negative gearing with such vitriol when they saw that??

Peter the Lawyer:

23 Sep 2014 8:15:17pm

Negative gearing costs nothing to the taxpayer. The deduction of which you speak is the general one that applies to business expenses. Deductions do not cost, they merely ensure that income tax does what it is supposed to do, tax profit not revenue.

wig:

24 Sep 2014 9:52:03am

I disagree with PTL. When you can use your deductions from the negatively geared property to reduce your taxable income below what it would have been from your other source of income which then gets you a large refund it costs the taxpayer something. I should point out that I have taken advantage of this in the past myself.

Stuffed Olive:

23 Sep 2014 2:22:44pm

There is evidence published in the SMH and elsewhere of the story behind one mining company paying bugger all tax because of the faux loan accounting. You must have missed it. Berg is just doing the usual bidding of looking after the big end of town but all he reckons is that it is not as bad as we think, so that's okay?

Bilbo2:

23 Sep 2014 11:23:40am

Mr Berg is spreading the propaganda of the IPA's corporate sponsors. The studies referred to only evaluated funds that were profits "declared" by the multinational corporations. The corperate tax lawyer's perspective that funds used in "faux borrowing schemes" could not be identified as profit was trustingly accepted without question.

The growing cynicism that multinationals use a variety of contrived devices and manipulations to avoid paying a fair share of taxes is well founded. Only concerted efforts among nations will prevent further growth of multinational corporate power to the detriment of the vast majority of the citizens of the nations they operate in. Adam Smith clearly identified a need for governments to regulate against collusive corporate activity.

Peter the Lawyer:

23 Sep 2014 8:41:44pm

Speaking as one of those corporate tax lawyers, I can testify that the borrowing schemes to which you refer don't exist. The thin cap rules make sure of that. If you wish to be taken seriously, I think it behoves you not to throw groundless calumnies at evidence that doesn't suit your prejudices or to assume that the 'cynicism' of some unidentified commentators amounts to anything more than a pale rhetorical device of no real substance.

JohnC:

23 Sep 2014 11:25:44am

@Stuffed Olive:As any vaguely intelligent Accountant will tell you tax avoidance is as easy to manipulate as a few significant entries from a resident Australian company to a related entity offshore. Borrowing is a classic example with capital raising conducted offshore and the requisite capital being transferred from a tax haven located entity to its Australian company but at a higher rate. End result, the Australian company has higher borrowing costs and lower profits leading to a lower tax liability and the related offshore entity enjoys the margin of profits created but at a much lower tax rate.

polony:

BUT reality is nastier. Secured intragroup debt has a bigger purpose: ensuring there are secured friendly creditors so that if some external party sues you then they get nothing.

Asset protection - ensuring an unfriendly litigant or ex-spouse gets nothing - gets much less attention from journalists than tax avoidance, but asset protection is usually much more important. As liquidators can reverse transactions that are structured for the purpose of avoiding creditors, businesses are quiet about this. This is the same for big businesses. Why do you think James Hardie's head office left Australia?

There are a few headline cases such as Google which are structured in ways that are very tax effective, but businesses are much quieter about asset protection.

Jack:

We live in a very competitive world. It has been that way since the collapse of the Berlin wall. Others want the life Australians enjoy. If we don't fight too keep it, others will take it (economically).

People can pretend and deny reality all they wish, however eventually reality catches up on us all.

Australia needs the world much more than the world needs Australia. That world like it or not includes multinational companies. I mean how would the little Aussie hard done by battler ever get by without the latest i phone?

mt_syd:

investment is attracted by the potential rate of return, tax rates are a secondary concern (and it is not true that the lowest tax countries provide the highest rates of return)

the big end of town is owned by the richest and most influential people, and there is nothing they like more than being able to coerce governments into a race to the bottom on taxes. It is exactly what Gina Rinehart did to our mining tax.

The benefits of low taxes on multinationals flow mostly to the biggest shareholders, not to consumers, not to workers, or even to the people responsible for most of the innovation who work in those companies

MT_Syd:

Australia's tax take is significantly less than the average OECD tax take. The OECD average is over 30 percent of GDP. Ours is about 21 percent.

Our welfare system is also more or less the most highly targeted and tightly means tested. Only the US is more stingy with welfare than ours.

It is a fact that the wealthiest people own the biggest share of the stockmarket, and a fact that they benefit the most when dividends are increased.

It is also a fact that many of the multinationals that operate in Australia are mostly foreign owned, (google, apple, the miners etc).

And it follows that it is a fact that increased dividends to these companies flows mostly to wealthy overseas investors.

It is also a fact that the top 10 percent own about 60 percent of the wealth in this country. And of that 10 percent the top one percent owns about 20 percent of the total. In contrast, the bottom half of the population have more or less zero net wealth. These are facts.

It is also a fact that many, possibly most of the largest fortunes or the top 1 percent were inherited, not earned, and that most of these individuals do no actual work at all.

mt_syd:

Noah's Ark:

ADD in the GST and state taxes and there you have your figures. The GST is a Regressive Tax that impacts proportionally much more adversely on the low socio economic strata of society.

Corporations and the Rich twist and turn and control the financial agenda of governments but none more so than the Abbott LNP government.

The Abbott government likes to crow (misinformation in reality and mislead) that it supports small business. Is that why the Harper Review recommends further deregulation in the states of Queensland, South Australia and Western Australia so as to benefit Coles and Woolies and put the squeeze on what is left of independent grocers who support local suppliers not overseas or interstate suppliers and thus share the pie around ?

Or that Harper proposes the Deregulation of the Pharmacy industry so that Coles and Woolies can then dispense prescription drugs but without the customer service and expertise of independently run pharmacy business's and force them to disappear off the retail map and put money into the pockets of the CEO's and shareholders of Coles and Woolies, rather than share the proceeds and profits around.

Or rather is the Harper Review a sop to the international Drug dispensing corporations that currently dominate the North American market to simply set up shop here in Australia and force their profit taking ventures and profits back overseas to the United States?

And that is not even taking into account the downturn in employment that this will inevitably create. Already the big supermarkets have had self checkouts for a number of years just so that the CEO and shareholders retain more of the profits.

The Harper Review and the Abbott Government are in reality anti small business and pro larger corporate profits at whatever expense to the Australian Community.

Noah's Ark:

The Harper Review also wants to totally deregulate the Alcohol/Liquor industry.

Is that so we can have easier and more access to alcohol and all the benefits that bestows on society?

Or is it so anyone with a retail food/grocery outlet can sell/push alcohol in ever increasing abundance to consumers and make up for the shortfall in lost grocery revenue to Coles and Woolies?.

Or really is it that Coles and Woolies with their extensive buying power and manipulation of the market can increase and control the trade in Alcohol?

Just another example how the Abbott Government goes into bat for small business.

We already know that the Abbott Government is extracting every last cent it can from the multinational corporations and the great benefits and spinoffs that the Abbott Government is doing in this regard for Australian society at the expense of the Greedy Multinational Corporations.

What else can one hope for from the Abbott Government when it is so beneficial to ordinary Australians ?

Caffettierra Moka:

23 Sep 2014 5:34:35pm

Tax rates in Somalia must be rock-bottom. But, I can guarantee you that no-one is lining up to throw money at the place. Tax rates in Australia might be higher, but we can attract investments like the 16 billion dollar Carmichael coal mine signed in August.

Why? Because it is SAFE. As a nation we will respect contracts and land title. We will provide labour that is trained and not former pirates. The government is not likely to change from one armed gang of thugs to another armed gang of thugs every month. We won't either loot the sites or hold the staff to ransom. You might say that the paying of taxes is a guarantee of returns.

SilentCastaway:

23 Sep 2014 3:47:54pm

'When they aren't shifting profits they are hiding profits using complex faux borrowing schemes. Tax avoidance is rife and nothing actually proves otherwise'. Yes, the Unions have a lot to answer for don't they?

burke:

23 Sep 2014 4:58:02pm

I was the accountant of a smallish multinational back in the 1980s. We were the subject of an aggressive tax audit based on an assumption that we used transfer pricing unfairly. The result was an acceptance that we used transfer pricing fairly. My point is that the tax office has been addressing this issue for decades. The colour of the government at the time is irrelevant.

Peter the Lawyer:

23 Sep 2014 6:00:05pm

I think you are letting your prejudice get in the way here, SO. Chris Berg has presented evidence that multi-nationals are not dodging taxes through profit shifting.

The borrowing schemes of which you speak have long been outlawed under the Thin Capitalisation rules and the transfer pricing rules also stop dodgy pricing of goods and services. The fact is that tax avoidance by multi-nationals is very difficult. The avoidance comes mostly from smaller enterprises.

Caffettierra Moka:

24 Sep 2014 11:17:50am

How difficult is it to move your company HQ to the Bahamas or the Caymans and pay zero tax? Pretty bloody easy. And as all you have to do is lodge some papers and rent a PO Box you don't need to actually move there.

James Hardie Industries is headquartered in Ireland. They aren't there because that is where they do business. And they aren't a 'smaller enterprise' either. How many other big 'Australians' just wave away the tax laws by this simple scheme?

DeepFritz:

23 Sep 2014 9:33:36am

There really should be a globally regulated tax rate for all companies. The tax should be applied to where they are doing business rather than where they have a shell HQ because of favourable treatment.

I wonder how many companies will in the future exist purely in cyberspace, because corporations are people too...

Dugong:

23 Sep 2014 10:52:24am

Good luck with that one, DeepFritz.

Democratic Governments don't exist to mutually agree with each other - they aim to seek competitive advantage for their citizens.

As long as a government sees a benefit (more revenue, higher employment, more votes) they will encourage and entice companies to do business in their country (tax breaks etc), to the disadvantage of another country. It is up to the company to choose whether or not to accept the enticement.

And basically, that is how it SHOULD be (as long as corruption/illegality is not involved).

EEL:

23 Sep 2014 8:26:39pm

I'm not sure you've quite got the idea of "the tragedy of the commons". That term refers to a situation where common goods (i.e. those that are rivalrous but non-excludable) may be (and frequently are) used in such a way that produces negative externalities. While it is true that even in capitalist economies there are common goods that are misused, common goods are far more prevalent in socialist economies (by definition), and presumably the abuse of them would be more prevalent as well.

Peter the Lawyer:

23 Sep 2014 8:58:11pm

Mt, what you are doing also has a name, non sequitur. The argument put by Dugong was for competition between nations. You argue against an ideal in which nobody believes, untrammelled capitalism, and pretend somehow that is an argument against vDugong. It isn't. It is merely poor use of logic and thus very poor rhetoric.

Noah's Ark:

So long as the Corporations write the rule book they are going to rip off society(all societies)and the planet.

The corporations are very happy with the legislation as it exists in Western nations.

The multinational corporations make sure the politicians legislate in a race to the bottom to appease the multinational CEO, shareholders and hanger oners so they can continue in a legitimate (Criminal in reality. Legislation and Laws are man made and not without major flaws so don't pretend otherwise) endeavour to destroy the planet and control society at the behest of Greed.

So long as the wealthy and powerful can secure untold advantage over the rest of us why should they care or want it otherwise? I call it Evil.

jp:

GregL:

23 Sep 2014 12:36:16pm

Bingo JP! This is right wing propaganda from the IPA. It is not surprising that Dhammika Dharmapala comes from the University of Chicago (The Law faculty), which is home to home of the Chicago School of Economics so revered by conservative groups such as the IPA.

Why is it that Apple for example shifts its profits to Ireland via Singapore if there is no or little benefit? Apple uses Ireland as a base because there is no corporate tax payable in Ireland for them as they are managed and operated from an external place, California. If this changes we will see Apple fly off somewhere else.

There is no real competition in tax rates unless we are talking between small countries like Luxemburg, the Channel islands, Bermuda and so on.

MT_syd:

burke:

EM Laidly:

23 Sep 2014 9:36:34am

privatisation of Essential Services has been one of the great Neo-liberal failures of the past 30 years, yet the acolytes of Reagan-Thatcher-Friedman continue to bear the blooded standard of low corporate tax, deregulated economy. Please tell me of an sovereign economy where the private sector successfully deliver:

EM Laidly:

23 Sep 2014 1:24:21pm

@AqousDeregulation, or "self regualtion" is another form of privatisation.

Once the Glass Steagel Act was repealed by Clinton, the banking chaos started to build towards the GFC.

All mining corporations fight tooth and nail to prevent environmental oversight. Shell Oil in Nigeria is a good example.Our own National Party, once the voice of farmers, now provides agency for the mining corps to pollute arable land and aquifers with fracking.

To add to my above list of failed privatisations:7. Power and Gas8. Telecommunications

Dugong:

23 Sep 2014 1:56:00pm

7. Too early to tell, but in Qld the number of blackouts in my area (outer Brisbane) have decreased dramatically from one every 3-4 months to once a year (there has clearly been a huge increase in infrastructure in our area)

8. Telecommunications?? Are you kidding me?? It used to cost $2 a minute to call o/s under Telecom. Ever since it was opened up to competition that price has been slashed to a few cents, and now is often "free" once bundled into a monthly plan. Telecommunications is the second best example of privatisation being better than public, right after number 6. Environmental protection.

Susan:

23 Sep 2014 2:50:04pm

Same in Vic - in my area blackouts are a weekly occurrence. My appliances are all suffering because of the constant cold starts - they were never designed for this (who turns their fridge off at least once a week?) . Under the former publicly owned SEC we had linesmen who performed maintenance to detect faults before they became supply issues, or even worse, started huge bushfires which killed vast numbers of people. The people of Victoria were sold privatisation as a means of getting 'cheaper' everything. Prices are now at record levels and about to go higher - not because the cost of supply has increased, but to protect the profit margin of the multi-nationals. There are some things that should be left public hands, such as essential services - power, gas, water etc... Now instead of deriving our income from these utilities, we have mobile revenue raisers (aka speed cameras). Now that the public respond and drive within the limit so as not to get fined, the government responds by quietly lowering speed limits all over the state so they can catch the confused motorist out and get more money. Brace yourself QLD, it will only get worse.

Noah's Ark:

There are oodles of satellites in space from which telecommunication corporations can access their overseas and long distance phone calls just for starters.

No longer do people depend on a telephone line at their place of residence for communication. Mobile phones are the NEW money maker for telecommunications industry. Try costing how much it costs when you take your mobile phone overseas and make calls. A little more than $2 per minute I think you'll find.

Furthermore the telecommunications corporations bundle internet services into their mobile phone supply and pay structures and despite the glossy and illusionary advertising mobile phone bills are often in their thousands of dollars.

Who hasn't heard of or seen on TV on one of these dressed up current affairs programs on commercial TV where someone has an outrageous mobile phone bill. Or some kid or teenager has acquired some outrageous mobile phone bill. Or someone has travelled overseas and unexpectedly ranked up a mobile phone bill in the hundreds of thousands in extreme examples.

So Dugong your example of telecommunications coming down is nothing but a Furphy unless of course you are somehow stuck in the past and can't understand the technological advances Australia and the rest of the world has experienced since Telecom Australia was available.

ScottBE:

23 Sep 2014 2:50:57pm

Aqous it does depend on how you measure performance.

If your sole measurement is profit, then certainly private services will out-perform public every time. If you value provision of services then private falls way down and cannot recover due to their primary constraint of profit motive.

Consider this in terms of health instead of banks.

Public hospitals here in Aus are top of the range and leave american health care for dead. Private hospitals make a profit (mostly) and provide specialist services but not general broad gamut of essential health services.

Bilbo2:

23 Sep 2014 12:41:02pm

Totally untrue, Socialism is defined by the means of production being owned and controlled by the state. The "socialist Labor governments" you refer to have actually privatised public assets in accord with Neo-Liberal theory rather than the other way around.

Peter the Lawyer:

23 Sep 2014 9:03:46pm

Why lie. No company pays 10c in the dollar tax. You only make yourself look really stupid by saying such things. All companies pay 30% tax on their profits. Only dolts who don't know the difference between revenue and profit would say anything else.

Evan Giles:

24 Sep 2014 6:08:36am

Paul Keating floated the dollar because in the mid 80's around 1989 he was forced to sell almost all our gold reserves to prop up the falling Australian dollar and by floating the dollar it meant we could eventually sell our gold reserves which he would have done just like Howard, however I'm certain he would not have sold it cheaply as stupid Howard

Also I will quote for you a famous statement by one Paul Keating in relation to convenient rate rise before elections and I quote " The Under Secretary To The Treasure stated at a speech in the national press club that all dealings between the treasurer and treasury have been above board and proper but for those with the inside knowledge would know this has not always been so"

And also Howard got his little moniker Honest Johnny during the days of the "Bottom of the harbour schemes" which was costing the Australian tax payer $800 million a year because Howard was to gutless to do anything about it and buy the time Fraser/Howard had left office it had cost us taxpayers $4.8 Billion in lost revenue and it was this fiqure he gave as the Federal Defecit at the time however when properly calculated that actual fiqure was closer to $8 Billion

So again for those Liberal trolls who continue to repeat ad nauseum the lies that have been pedalled over the years about who has been the better economic managers remember what I have quoted here and don't ever forget it because as the oft quoted statement goes " Those who forget their history are quite often likely to repeat it"

Now if any of you care to look for this particular video of one many of Paul Keating speeches you will notice John Howard jumping up and down screaming at the speaker " He called me a liar, He called me a liar " and as the old saying goes if the shoe fits wear it but also the speaker pointed out to Howard he had not called him a liar he had merely quoted a statement from someone else

Dame Paul Pott:

23 Sep 2014 2:48:47pm

The last time I heard an ALP politician use the word "socialism" was in 1981. All the state and federal ALP governments we have had since then have been neoliberal, exactly the same as the LNP. The only difference has been the support bases they pander to.

rattan:

blax5:

23 Sep 2014 10:30:27am

What I have read from Britain only a few days ago is that compensation is inserted into the new contracts for privatisation/government outsourcing. It has been criticised that their current government prepares 10 year contracts for these corporations, pretty close to an election. In the event that a new government must cancel the contract, the taxpayer is up for compensation. There is obviously an argument that willy-nilly cancellations do not occur but it sounded excessive what the Cameron government seemed to prepare. But at least it leaked out.

From the US I have read that prison corporations get a guarantee for a certain number of inmates or the State pays up.

At the end of the day, it is always the government which has to straighten out situations with taxpayer funds.

Dugong:

1. Mater Children's in Qld provide excellent public health care. Qld Health has been less than shining, shall we say.

Labor of course then legislated to merge Mater Children's into Qld Health.

2. Private education in Australia is doing better than state education, in terms of the success of attracting students. People are clearly happier to go private than public and are voting with their feet.

3. Rail Transport in the UK is privatised. It is quick, punctual and efficient.

4. Difficult to say. With privatisation comes better scrutiny (not a bad thing). But just because you might hear more of security failures in a private organisation compared to a government facility, doesn't mean that it is so.

5. Banking - you've got to be kidding me. The CBA used to offer awful service, long queues and limited products. The explosion and efficiency of Banking services in Australia is testament to the success of private v public.

6. Ironically, the countries were the state owns all the factories have the worst environmental outcomes in the world - look at China and Russia. Of all your 6 points, the final one is the one that really destroys your argument.

Applaudanum:

23 Sep 2014 1:02:18pm

"2. Private education in Australia is doing better than state education, in terms of the success of attracting students. People are clearly happier to go private than public and are voting with their feet."

Perhaps that is because they are misinformed. Perhaps people hear the 'Private School students get better tertiary entrance scores' more often than they hear 'State school students outperform their Private school educated contemporises by 5% at first year University'.

Dugong:

Perhaps, indeed, they are misinformed. But if that were the case, you would expect to see private school enlistments declining, as word spread.

Or perhaps most parents don't sent their children to private school just to get better grades.

Personally, my kids went to private school to leave a public school that had made national news because of assaults that had occurred in the junior school toilet block ( by grade 3 boys, against grade 2 girls) that the principal had done nothing about for 2 years, despite having full knowledge.

In other words, private schools can (stress the word CAN, not will) provide an environment more conducive to achievement and learning than some (SOME) state schools, which are little more that holiday camps for feral children.

Applaudanum:

23 Sep 2014 4:09:15pm

"Perhaps, indeed, they are misinformed. But if that were the case, you would expect to see private school enlistments declining, as word spread."

Yet the spread of the word happens very slowly. You've only got a window of a few years to each of the parents who might be concerned about such matters. In the meantime, you've got the newspapers printing rankings based on tertiary entrances, but not on first year uni results. How does word spread with such an imbalance in broadcasting?

The disconnect between higher tertiary entrance scores and underperformance at University - within the space of a year - is the big disconnect no one wants to talk about.

The results point to the fact that Private Schools, taken together, are relying on ROTE learning to achieve higher tertiary entrance scores. State schools, because of all the feral children, are putting forward more independent learning reliant upon student initiative. It is exactly this style of initiative-fuelled learning that assists students at University. Parents paying top dollar for ROTE learning are getting ripped off.

rockpicker:

prison:

23 Sep 2014 1:45:39pm

3. Rail Transport in the UK is privatised. It is quick, punctual and efficient.

This one made me laugh. I was in the UK 13 years ago and a short train ride cost me 10 pounds. I had to lug my suitcases across platforms to change from one privately owned rail network to get to another. the same trip would cost me $3.40 here, not $20+. there is no competition because each company has a monopoly on each section of the line.

Secondly, not only were the trains disgusting and falling to pieces, but the platforms and tracks were as well. Our rail system is far superior.

I suspect that all of your other points are equally ill-informed or parroting propaganda.

black parrot:

23 Sep 2014 3:41:48pm

I don't think that a simplistic wish-list of unsupportable assertions helps your case, Dugong. Certainly, as noted by another writer, the British rail system is an expensive shambles, especially when compared to the modern, efficient and state-run French system. And it's nice to hear you've had good experiences with private banking; alas, such pleasures have been denied me.I don't believe that it's a case of private good, public bad or vice versa; rather, some organisations, whether private or public, can get their act together and others simply can't.

burke:

LMF:

23 Sep 2014 11:57:12am

@EM

Please provide examples where the private sector has actually been allowed to provide the listed services. Governments are heavily involved in all those industries either directly through spending or regulation.

firthy:

23 Sep 2014 12:05:48pm

I can easily comment on number 1 on your list. My family's experience is that the private system can deliver very good outcomes. The public system does too (and we have had som good experience there - some not so flash too though). So it isn't a case of one being great and the other hopeless as you imply.

OUB :

23 Sep 2014 1:32:35pm

Check out Generation Healthcare EM. They invest in properties related to healthcare, including hospitals. They can build hospitals at a fraction of the cost of the public sector. This is because in the public sector the doctors involved in the planning have rather grand ideas - more rooms, bigger rooms, nicer finishes. When Generation are involved they say 'fine, this is the rent we will charge you'. Very quickly those grand plans are downsized. They often end up as the buyers of facilities built on the public purse for a small fraction of the cost. That level of efficiency flows through the system in reduced costs. They say their doctors appreciate them and their responsiveness to the doctors' requirements. They remain as tenants. How much is spin I can't say but those are the kind of factors you can look out in your investigations.

ScottBE:

23 Sep 2014 2:46:16pm

Well said.

I've worked in both private and public health systems. Patients in private hospitals may get a glass of wine with their meals (supplied by doctors with vineyards as a tax dodge) but the health care is far better in the public system.

Privatisation is ok for specialist services perhaps but is unreliable, limited and profiteering to the point where if the company considers a part of their service not cost effective they will drop it and remove necessary adjunctive client management features.

EEL:

23 Sep 2014 8:52:22pm

1) Switzerland - although the government does have some role in regulating and subsidising the health system (which is right and proper), it remains privately operated. And it operates fantastically - one of the best in the world.

2) Sweden - their education system isn't technically privatised, but the introduction of a voucher system (which is a first step in that direction) led to an improvement in outcomes.

3) Japan - I don't think that there's very much need to further elaborate, given their reputation.

4) Don't be ridiculous, only an anarchist would want you to privatise those.

5) With the exception of emergency nationalisations like those that happened in Iceland immediately after the GFC, the only countries with primarily nationalised banking systems tend to have basket case economies - Venezuela, for example.

6) Most economists - even those on the right - agree that market failure often occurs in relation to environmental issues, so that is a point I concede, but I don't think it very helpful to your cause to be attacking a position that no (serious) person holds.

Patrick:

Tator:

23 Sep 2014 10:37:40am

Obviously you missed the apology issued by Fairfax over that initial report on Glencore:"Reports, including this one, say that Glencore had paid little or no income tax for the past three years. This is incorrect. The company has stated that it paid more than $400 million in corporate income tax in Australia over this period. Fairfax Media also wishes to clarify that the $15 billion presented as taxable ?income? in these stories relate to revenue and not taxable profits"

Redfish:

Brian Francis:

23 Sep 2014 11:47:33am

'Glencorehas turned tax avoidance into an art form'One is given to wonder how you are so sure of this?Also one wonders if it is tax avoidance, then by definition it is illegal, so where are the charges?Just putting out words and calling them truths is not enough - you need to back up your claim here.

Ted:

23 Sep 2014 9:42:45am

I find all this difficult to believe. Apple makes $18 billion in Australia and pays $4.50 in tax or thereabouts. There are numerous other examples. We are expected to believe this is not a problem because a couple of previously unknown experts and the IPA which believes there should be no taxes tell us so.

As much as I now dislike Joe Hockey, I hope he has a win on this one for all our sakes. If we want to keep our taxes "low and attractive" we need to stamp out avoidance and evasion.

Peter the Lawyer:

23 Sep 2014 9:12:45pm

So we should take cuts. What a bunch or wimps Australians are becoming, running to mummy government for everything. How sad. Why not get out there and make your own fortune and stop blaming others for your lack of success and then expecting them to fund your lifestyle.

Peter the Lawyer:

23 Sep 2014 9:32:01pm

Apple doesn't "make $18 billion in Australia" it may have a turnover of that much! but turnover is taxable is it? I suspect too that a lot of that turnover is made from Australians but is not sourced in Australia because the Download is being purchased from an offshore server. It is the same if you ordered goods from overseas. If they are shipped to you direct from a foreign vendor, then the vendor isn't subject to income tax on any income received from you.

AJB:

23 Sep 2014 1:17:32pm

Ben has previously confirmed that he is a hopeless legal mind and now he confirms he is deficient at economics. Spending goes up with rise in population, inflation and demographic changes even before you look at increasing breadth or standard of services (which he implies is the cause of the problems).Stick to the topic of taxation avoidance or evasion and not use the tactic of look over there its ISIL (or spending).

Peter the Lawyer:

23 Sep 2014 9:19:57pm

And you AJB are neither good at accounting nor law. Revenue and spending go up with an increase in population. You don't need more revenue to look at the breadth or standard of services. Only Labor supporters think that more money always means a better service from he government. As Kingsley Amis famously said when he was told that the UK government would spend more on universities: 'more means less'

Btw it wasn't BtL who brought up revenue and spending. He was replying to someone else.

mt_syd:

Throughout the Howard government revenue was about 24% of GDP, until 2007 when he started cutting taxes.

By 2009 tax revenue was 20% of GDP.

Expenditure during the Howard government was also close to 24% of GDP for most of the period, slightly less in the last few of years (hence the surplus).

Expenditure spiked during the GFC, to a bit over 25% of GDP.

Since 2009 revenue has risen slightly to about 21% of GDP, and expenditure has fallen to 24% GDP.

The pattern over the period of the ALP government was an intial sharp increase in the deficit , caused mostly by the drop in revenue, and to a smaller extent by an increase in spending. Then in their second term revenue has risen slightly and spending has fallen, narrowing the gap.

Compared to the OECD average we are a low tax country. So Berg's argument that we need to drop tax more doesnt make much sense. The overall tax take in the OECD is more than 30% of GDP - we are a long long way below that.

the yank:

23 Sep 2014 4:25:21pm

I really should not have to explain this to you or anyone else but ... A budget plans for certain things to happen. Expenditures and revenues however cannot be set in stone they BOTH vary according to circumstances.

fighting wars or the inability to get certain tax measures through the Senate are some things that impact on both sides. But also tax revenues might not meet expectations. If you had been paying attention to Sloppy Joe you would have heard him bemoan that iron ore and coal prices have not been at the level he expected. Hint, this means fewer dollars coming in to Treasury and Joe trying to figure out a way to blame Labor for this problem.

Cyn:

23 Sep 2014 9:57:38am

"It's not obvious why we should share their concern."

How about because we either have to be taxed more as individuals to make up for it, get less services that benefit us or borrow to make up the shortfall. That doesn't even touch the subject of making it harder for smaller businesses to compete making monopolistic behavior easier for these large companies.

I couldn't hold back this response so this was typed on my phone in a rush, I hope it's readable.

Raskul:

Empi:

23 Sep 2014 10:02:54am

Your Argument seem to be, don't do anything because not everyone does it. Seem to me like you could use the same argumnet for any crime. No Point putting Murderers in goal because only some people murder.

Tomarrah:

23 Sep 2014 10:03:26am

Right I think T Piketty (Capital in the 21 Century) gives the right perspective on this type of argument :

?the decrease in the top marginal income tax rate led to an explosion of very high incomes, which then increased the political influence of the beneficiaries of the change in the tax laws, who had an interest in keeping top tax rates low or even decreasing them further and who could use their windfall to finance political parties, pressure groups, and think tanks.?

Glenrortminingco:

23 Sep 2014 10:09:18am

No doubt the author's thought bubble will find a welcome ear in our Treasurer.Tax avoidance - merely a flesh wound.If the government will not address big volume leakage of taxes thanks to tax-dodging offshore interests, what chance is there to address the on-going onshore rort that is negative gearing?Negative gearing, the curse that keeps cursing.$4B/yr blown on loss-making 'investors' to not build stuff.Ban the neo-con, not the burka.

mt_syd:

23 Sep 2014 2:06:18pm

it isnt just negative gearing, it is also that capital gains on real estate is taxed at half the usual rate

but the really big item is the tax arrangements on superannuation that overwhelmingly favour the top 1 percent, and cost (in lost revenue) not only more than the entire cost of the unemployment benefit, but pretty close to the entire cost of the pension system

they could also ditch the paid parental leave scheme (5 billion) and not buy billions worth of additional fighter planes (on top of those we already planned to buy)

also there are the tax breaks on company cars (1 billion a year)

there is no shortage of money if we really want things like:NDISneeds based funding of educationcheap higher educationbulk billed GP visitsfibre to the home broadband

it is all quite doable - it just means the top 1 percent have to lose some small part of their perks

MACK1:

23 Sep 2014 10:12:19am

So what happens to the avoided tax? It goes to the employees to spend as they wish, to more investment in the company which creates more jobs and economic stimulus, or in dividends to you as a shareholder or through your super fund. Much better than going to politicians' vote buying schemes.

mt_syd:

if it goes to dividends then it is going mostly to the people who are already the wealthiest, and none at all is going to the bottom half of the population (because they own nothing at all)

and most of the dividends of multinationals goes to foreign investors, and is lost to our economy

as for the idea that it goes to employees, are you serious? Did you not see the report last week about the huge numbers of indentured workers in Malaysia who produce our cheap electronics?

Big companies should pay a decent amount of tax because they rely on taxpayers to fund the basic research for their products, to educate their most innovative workers, and to provide stable markets and economies in which to operate

Bundy:

23 Sep 2014 2:41:11pm

Are you kidding? Goes to employees? Please let me know who employs you because I don't recall getting a share of post tax profit from any company I worked for. A small bonus maybe that they get a tax refund for anyway, but no profit sharing. Most share holders are not you and I anyway, they are hedge funds that funnel profits through to their already rich clients. Sure, dividends and share growth are great for super funds, but much of that gets eaten away before it actually makes it to your account.

If I have to pay over 33% of my income (revenue) to help maintain my place in society, then why can't a corporation? Most don't even pay anywhere near the corporate tax rate, let alone a fair share.

GJA:

23 Sep 2014 3:03:40pm

Except that's not where the "avoided tax" goes. It goes mainly into the pockets of the executives, whose compensation outstrips that of other employees by incredible multiples, an ever-widening gap. Those wealthy few can't spend their millions fast enough to be injecting money into the economy. Besides, even the surviving architects of "trickle down" economics renounced their faith, years ago. Why do you cling to it?

Cyn:

23 Sep 2014 4:22:33pm

"So what happens to the avoided tax?"

It either a goes to the shareholders of the companies (basically entirely offshore) or it get reinvested into the company allowing them to upgrade or obtain assets that give these companies a competitive edge against competitors who don't avoid tax, encouraging those competitors to start avoiding tax just to keep up. That leaves the government in an even worse financial position.

On the other hand, if the tax was paid, the government could:a) Lower income tax rates and other feesb) Lower the deficitc) Increase funding for services (e.g. health, education, law enforcement, infrastructure maintenance, environmental protection, and so on) to get better performance4) Fund infrastructure projects (this would wind up being a net benefit for business through increased efficiency and opportunities)These possibilities are the very basic sorts of things that could be done with increased revenues, there are other possibilities, but if you want to call them vote buying schemes go ahead, I definitely want to vote for the politician who can build new infrastructure, reduce (or eliminate) the deficit, increase funding and performance of services and cut the tax rate I'm paying. Who wouldn't vote for that politician?

Peter the Lawyer:

It always amuses me that people think that if tax increased you will somehow get higher tax revenue that is equal to the percentage of he increase multiplied by the money you are seeking to tax.

But I think the big myth is that he average person is over taxed. After all it is the average person and those below him that use government services the most. So EY need to pay something. In fact they pay very little. Increasing funding for services of government doesn't necessarily lead to better outcomes, as the drop in public school test scores has shown.

hugo:

23 Sep 2014 10:13:41am

When someone buys a good and/or service, a percent of that sale is profit for the business. So tax them at the point of sale, GST, and lower the company tax rate so they all come here to pay the minimal tax rate, Australia will become the tax haven of the world. After all a 2% of a mountain is more than a 30% of a mound.

Peter the Lawyer:

23 Sep 2014 9:55:15pm

Sorry but he difference is that tradesmen evade tax, which is illegal, they don't avoid it. Also many of the things about which you complain as tax breaks for e rich are either not so or are totally legal. In neither case can the "rich" be said to be avoiding tax.

blax5:

The idea that competition, here on tax rates, is the magic bullett for all and sundry is a bit outdated, and like every principle taken to the extreme it produces more problems than it solves.

Every year the proportion of our $s that we spend on products from multinational, expertly structured, corporations grows and grows, so naturally profits accumulate elsewhere and individuals are left with providing the federal budget. Whether this development has gone too far already or will go too far soon, is difficult to say, but we need to acknowledge that once a multinational has taken over the market, it's normally a one-way-road.

Peter:

23 Sep 2014 10:22:58am

"But these lower numbers help resolve the big profit shifting puzzle. If the corporate tax base is being eroded, then why is revenue from corporate tax going up?"

Did you check the obvious explanation Chris, that corporate profits as a fraction of GDP may have gone up? In just a few minutes I could show that in the last 20 years corporate profits have gone from around 1.9% of GDP to 4.0%. I couldn't easily find the profit figures from the '60s.

So this may explain why the tax take has increased. The corporate profit figure gives no information on the issue at hand as it is only the declared figure, the real interest is in the profits made in Australia but declared elsewhere. You have contributed nothing to estimating the size of this problem.

hidi:

23 Sep 2014 10:31:35am

Chris how do you set a corporate tax rate for business that survives on government hand outs like the car manufacturing industry when the governments really paid any tax with tax payer corporate funding.

Peter of Melbourne:

23 Sep 2014 10:31:48am

more smoke and mirrors by one from the lnp/labor duopoly.

it is not hard to prove profit shifting and it would not be difficult to amend all existing legislation to stop it and all other tax minimisation schemes. any multinational found guilty of the act could then be banned from any and all operations in this country by any of their entities. problem solved.

or are multinational concerns a higher priority than the concerns of the citizens of this nation? going by the past performance of the LNP and the Labor/Greens it is not hard to come to that conclusion.

Peter of Melbourne:

Monty B:

23 Sep 2014 1:17:54pm

Peter, you show us your list of former ALP figures now working for big business, many of them in industries related to their portfolios, and I`ll shown the list, at least as long, of LNP figures. Nobody comes out of this smelling like roses.

Maynard:

23 Sep 2014 10:36:47am

Obviously nations are competing for business and offering incentives, yet the aggregate amount collected is rising.It seems to be a little like the Australian States luring businesses & people here.In the end death duties were competed away, probably one of the most equitable of all taxes.We had ourselves to blame but also a lot of duplicated infrastructure, eg oil refineries.

Wave2me:

This is such a difficult issue to solve, or even know the extent, simply because we conduct business all over the world.

Example. BHP listed on both the London and Australian Stock exchange.

Mines material in Africa, loads it on a Greek ship, and sells it in China.

How much tax is payable and to who?

Every country has a different system.

The African country might have a zero tax on profits, but charge a set amount per ton of ore exported.

China might charge per ton imported, or a percentage of the sale price.

Is the UK and Australian government entitled to anything? After all, the ore in my example was mined in Africa, and sent to China.

If it was mined here, and steel mill in china, what portion of profit should be Australian, and what portion China.

If a car is built in China, and sold here, same question, and who decides what those portions should be?

In the case of an Iphone.

Company listed in the USA, subsidiary in Ireland, designed in the USA, Processing Chip designed in Sydney, software done in India, components from Japan, made and assembled in China, and shipped direct to Sydney, or France or the UK.

Which country should profits be attributed to and Taxed in?

Each country has a different system of tax, import and export duties etc. How do you reconcile all that?

Its clear that companies do set things up to pay the min tax, but how do you unwind it, or even establish what is fair.

And if a high portion of the profit is for example, portioned to Ireland, because they have a low tax rate, do you think they are going to willingly part with the tax they currently receive, because we want a bigger slice?

It sounds so easy, until you start to look at the details.

Even if every country had the same tax rate, there would be fights to get a larger portion of the profit attributed to Australia than some other country, because every country would want the biggest slice of the tax pie as possible.

Peter of Melbourne:

well wave at the end of the day it is where the income is derived from for the product not where the profits are offshored to or where the product is manufactured.

it is a simple concept and there is nothing difficult about it all.

the governments in africa can apply a direct charge for the extraction and use of their non renewable resources just as the government of australia could if the lnp and labor were not in bed with the multinationals and looking after their interests ahead of the citizens of this nation. who cares how it is transported, that greek shipping company is liable for the tax bill on the income earned for shipping the minerals, not for the minerals themselves and when the goods are sold in china then the chinese government can impose a tax on the sale however since the goods are being sold to a chinese government owned entity who gives a damn.

it is exactly the same for an ipad, piece of software or any other product.

Wave2me:

Brian Francis:

23 Sep 2014 1:20:23pm

Wave2meYou are correct in making the point that tax payable is a difficult issue, once several countries are involved.This is what makes the world's economies actually integrate.It is not possible for all currencies to have the same value just as it is not possible for all countries to have equal output with regards to manufacturing. These variations, or at least the blend of them, are exactly what is needed to offer choice to world markets and thereby provide products that you and I can afford.Into the mix there is the differing tax regimes and just as base product is sought at the cheapest cost, so too is a tax bill that gives companies the edge to keep prices low.It is everyone's given right to view taxation in their own personal way and yes, some companies are aggressive in their demand for paying the least possible tax, but by enlarge unless a company or an individual is breaking the law of their own country or a country with which dealings are had; then they should be free to deal that way.If the world were to have a tax system that is equal throughout, then the world would be referred to as a State and that is quite impossible.

ScottBE:

23 Sep 2014 3:17:52pm

you make an excellent complicated point Wave...

I'm no tax man but it seems to me (and I value every comment which may correct my understanding) that Apple's iphone sales attract GST (mostly) so we get 10% of the sale price. This is a tax on the consumer not on the company.

Apple's sales outlet is a big business with high profits (incredibly small production cost due to using extremely cheap chinese labour), Now this is th nub of my concern. What taxes does the retail arm pay?

Now Apple is a huge corporation. They have a huge online presence and services from finance to software... you might as well say they are everywhere and nowhere. Apple may run its business from California but much of its business crosses all international boundaries.

Is this done to minimise tax? Given they pay so little, it seems tax avoidance may be their principle modus operandi.

Wave2me:

"Is this done to minimise tax? Given they pay so little, it seems tax avoidance may be their principle modus operandi."

Some of it is done for logistical purpose, that is the reality of moving product around the world.

Some of it is solely for tax purpose.

For example they set up a subsidiary in Ireland, where they negotiated a low tax rate.

So Apple in Ireland supplies a big portion of the international market, profits are retained there, so the tax rate is low (12% from memory).

The US is upset because the profits are not being sent back to the USA, but why should the USA get the tax for profits for phones sold in France for example?

Ireland is happy, as they are getting good tax revenue for very little effort or output.

So yes its a bit for logistical reasons, and a lot for tax.

We have to be careful, because if we demand the tax dollar for phones sold here, other countries might then demand the tax dollar for our mining and agricultural products sold overseas, so we might actuality loose more than we gain.

We cannot have one law or principle for our exports, and a different principle for our exports, our trading partners are not going to agree to that.

dpete:

23 Sep 2014 10:43:06am

Nice try, Mr Berg. However, any reader that cares to read Mr Dharmapala's report can see that the author does not state that tax avoidance as a whole is smaller than previously thought, which your article rather slyly attempts to imply. Dharmapala makes this statement referring solely to BEPS (base erosion and profit shifting).

Warren Jennings:

23 Sep 2014 11:07:32am

I'm keen for a balanced alternative opinion piece on corporate tax avoidance. This shows one extreme side of the debate, by by the Policy Director of the Institute of Public Affairs, which according to wikipedia also advocates for climate change skepticism, the abolition of the minimum wage, privatisation of state-owned enterprises, deregulated workplaces and industrial relations. At least ABC can't be accused of left bias.

Drt33th:

23 Sep 2014 11:09:33am

Usual story... let's all focus right in on the small picture.

Yes, like everyone else I want multinationals to pay their fair share of tax. That is not in dispute. However, for every multinational that employs someone ..anyone.. in Australia, we get income tax revenue, we get payroll taxes, we get contributions to Super etc etc etc... For every cent of salary over $37k per year, the treasury gets more per dollar if that money is paid to the employee than if it is declared as a profit by the company.... and then, when the employee spends it, we get the GST take ...another 10%... So... it is in our interest to encourage as many companies as we can to employ here and generate GST revenue here rather than risk 'chasing them away overseas' through threats of hunting them down for tax on 'shifted profits' ... I suspect that is the thrust of the article, and the basis of 'fighting for their affections'.

The real problem begins when we then encourage these employees to use government approved tax avoidance schemes such as family trusts and negative gearing to reduce or eliminate their personal tax burden (or effectively shift that burden onto other taxpayers)... That is what really impacts the tax take...

Truth is that the whole Australian taxation system is convoluted and complex, such that thousands of people earn their living as tax accountants, whose role in life is to minimise tax payments to the Treasury. Bring back the Henry report...and implement it!

StBob:

23 Sep 2014 11:13:54am

The reason that 2-4% number looks so low is that the vast majority of companies cannot shift profits offshore but a few very big and high profile ones can. You may as well say who cares if Google pays tax or not they only represent 0.01% of the tax base? The more that get away with it the more are tempted to try it.

ironore068:

23 Sep 2014 11:17:35am

The only way that tax avoidance will be stopped and overseas companies made to pay their fair share of taxes is to apply Pauline Hanson's tax system. It leaves Henry's tax reforms looking pathetic. Pauline wanted to erase every single current form of taxation in Australia and make a new system whereby as you take money out of the bank you get taxed 0.01% of your withdrawal. That would mean every single criminal and drug dealer and scam artist along with every company and every person would pay tax. It would produce a greater tax income by several billion than what the government currently receives.

paul:

Brian:

23 Sep 2014 11:19:02am

What a rubbish article! Berg completely ignores any discussion of what tax is *actually owed*, hiding behind inflation-fuelled totals to obscure the core issue. And big business *loves* complex laws. That means you just have to hire a better lawyer than the government and you don't have to pay anything. That is exactly how they avoid tax. And why the Tax Office is so litigation-shy, because the grad lawyers they can afford get toasted by the big boys in court.

Robert:

23 Sep 2014 11:19:58am

I'm sure if there were tougher anti-tax avoidance action, the corporations wouldn't mind, since - as Chris says - it would hardly make a dent. And they would welcome the chance be seen as good corporate citizens.

If governments are 'being forced to compete for the tax affections of the world's biggest companies', one might wonder if certain governments might not turn a blind eye every now and then to achieve this...

Jerry:

23 Sep 2014 11:28:15am

Where are your references to substantiate your argument? We all know that economists in think tanks select data to make a case that results in great claims, later shown to be false when academic rigour is applied.

GDP and productivity has been rising. The increase in profits has gone almost wholly to the investors. Thee workers and the governments host the businesses have only had very slim pickings ( See Stigliz on inequality)

Smartest Person in the Room.:

23 Sep 2014 11:49:20am

It is this comment that is the crux of the issue:

"Between 1965 and 2007 corporate income tax revenue increased from 2.2 per cent of GDP to 3.8 per cent of GDP in OECD countries. (Revenue fell somewhat during the Global Financial Crisis but is on the rebound.) This despite the fact that corporate tax rates have been lowered over the last 40 years."

So tell us what is the percentage share of their income to GDP? Have wages shrunk compared to profits? logically the bigger the take the more income tax you'll pay even if income tax rates rates are lower.

Kerrie:

Chris wrote "At the end of the day, consumers and workers benefit when corporate tax rates are low and attractive. Anything that pressures our governments to keep those rates low is a good thing."

When corporate tax rates are low, individual tax payers and small businesses have to pay more tax or else the government has to spend less which means that there are fewer consumers with money to spend. How is this fair for small businesses or individuals?

Adrian Gattenhof:

23 Sep 2014 12:00:13pm

We have a Govt addicted to creating new terrorism offences. So here's a real one: corporate terrorism. The parasitic corporate practice of draining communities of the social lifeblood of taxation which enables government to fund the essential services of a civil society.

The answer to corporate terrorism is not more rules and negotiations with CEOs and smart-arse corporate lawyers and accountants. It is to cut the Gordian knot of these elaborate schemes. The ATO should be empowered to hit artful tax dodgers like Apple, Google and their chums with a tax rate of, say, 50 percent of their gross income in Australia - retrospective to day one of business here.

Refusal to pay should be met, not with a court summons, but with an unannounced visit to the local corporate HQ by the anti-terrorism cops - doors smashed in, tasers drawn and a wake-up jolt fired straight into the ego of the local CEO. When the ATO gets the cash, the cops leave.

If it's OK for Qld cops to fire a taser into the eye of an Aboriginal women (as they did), then it's more than justified to taser corporate terrorists. Compliance would quickly follow. And what great television!

dinkumfair:

23 Sep 2014 12:17:44pm

There is one sure fire way to guarantee that multinationals pay their way. It is used by a number of "banana republics" so we should be quite comfortable with the method.

Simply make it a condition of doing business in Australia that foreign companies must form a partnership with the government so that Australia holds a significant shareholding in any large enterprise such as mining and other resource exploitation. If we had this requirement set at say 30%, then we could simply abolish all taxes on such enterprises as the dividends of our "share" (which we don't have to fork out any money for) would provide us with a fair cut of the profits.

This would also have some benefits for the said corporations, in that when times were tough and profits were down, their contribution to Australia would also be reduced.

prison:

23 Sep 2014 12:19:28pm

Berg your article makes me feel a bit i'll because you actually seem to agree with many around the world that corporate tax avoidance somehow benefits the economy. It doesn't, it just helps shareholders make more profit at the expense of government revenue. At a time of increasing debt, tax avoidance schemes (profit shifting is only one of many) need to be looked at to increase government revenue and pay the debt off.

I was waiting for some proof for your statements, but there is none other than to quote dhammika dharmapala who's research generally seems to further highlight the problem where corporations see tax avoidance as a means for profit and high powered incentives offered to employees to minimise taxable income.

I found some Aussie figures from a webpage in 2012:

Google made about 1 billion and paid 74K taxApple made $4.88 Billion and paid 94million taxIBM made $4.5 Billion and paid 119million tax

On top of that all of the big mining companies seem to pay very little tax at effective rates much lower than the rest of us. This is done partially by offsetting profits with ridiculously high wages and incentives and paying top dollar for equipment and technology. Oh damn, we dug a lot out of the ground but officially made no money....right!

So to conclude that tax minimisation schemes are not an issue is nothing more than industry funded propaganda. Surprise surprise, an article by the IPA, funded by those same companies who seek to minimise their tax obligations at the expense of Australia.

Having said all of that, apparently the issue is much worse elsewhere. The entire world is corrupt.

Steven:

23 Sep 2014 12:30:22pm

Mr Berg's logic is this: worldwide there is a multi-billion (possibly trillion) dollar business employing thousands of international tax experts advising corporates on how to minimise or avoid tax through structures, schemes and tax havens. The reason that industry exists is, according to Mr Berg, a falsehood because it has almost no effect on taxation revenue. They just do it for fun?

Erick Quang:

23 Sep 2014 12:30:39pm

Mr Berg we are now engaged in a war with isis .It will probably be a long and very expensive war and every one will have to pay for it including the companies that are evading taxation .We will soon be facing desperate times there for these companies that are not paying their share of tax are comitting treason and should be put on trial and be subject to the most severe punishment

Zathras:

23 Sep 2014 12:31:22pm

As somebody who includes a Family Trust in his Parliamentary Pecuniary Interests Declaration, it's a bit unreasonable for Joe Hockey to preach to others about the morality of tax avoidance or minimisation.

If it's legal it's fair game, so why not change the laws and the loopholes?

prison:

23 Sep 2014 1:24:36pm

Bit of an own goal there when advocates of corporate tax avoidance say that if it is legal, then it is fair game...and to change the laws if not happy about it

Why? because obviously the laws cannot chance in this environment of such corruption where political parties policy is entirely decided on based on who funds them. They are basically highlighting the influence of corporations in dictating policy and putting the spotlight on political and corporate corruption

Hockey may one thing but is completely unable to change these laws and loopholes without getting offside with the IPA and those who also fund and control the Liberal party.

Having said that, as many have pointed out - Labor had plenty of time to change the rules too, but either didn't or were unable to do so because of the same massive weight of opposition to the proposal.

Fixing the corrupt system = a massive loss in "profit" to these corporations. Its unethical, but its legal....what a messed up world. Imagine if there was no deductions and they just paid a flat percentage? The doomsday propaganda against this would be plastered all over our media as it was regarding the mining tax...

Esteban:

DAvid:

23 Sep 2014 12:34:28pm

You have got to be joking me, This article is the most flawed piece of bull I have read on ABC.

Apple paid 193 Milllion on 27 Billion revinue, they did this by selling their IP rights to a company they 100% own then let that second company back bill them. This isnt conjecture its fact. For a $650 Ipad they paid tax on only the $50 effectively billing over $450 in IP rights.

By the way the second company is in Ireland a tax haven that dropped its dacks to multinationals because it went broke.

Transfer pricing is Common practice in multi nationals they manufacture at one cost in India but declare another to our tax man reducing their taxable profit. They also do deals with each other with rebates ie buy 1 million of "x" and we will give a 10% discount. So during the year they can show recipets at price "y" then when they get their rebate it goes directly into their Account in their shell company in a tax haven. Its impossible for our tax department to track.

Westfields in Australia pays about 8% tax thats after an investigation using Property manipulation (apparently legally).

Its morally bancrupt for companies to do this but more morally bancrupt when these deals get out into the public domain and almost no politician want to say anything.

Nick xenophon at least went on the record for saying he was appalled by Apple Incs behaviour.

Esteban:

Is it possible that Apple is an extreme example and we are over extrapolating?

This article concentrates on the macro picture for which the data suggests only 2 - 4 percent of revenue is being taxed in havens.

If that data is correct then Apple might just be the tip and most of the berg as well. Why is it pretty much Apple that comes up when this topic is discussed? Who are the other multinationals that are also doing this.

The article also states that we have broad and powerful laws to snare Apple so the question is why have this Govt and the last Govt not done something about it?

Maybe treasurers like having scapegoats who "don't pay their share" to cover their own budget failures.

Handoyo:

prison:

23 Sep 2014 1:39:52pm

They try to keep this 'secret' but according to Wikipedia:"The IPA funded by its membership which include both private individuals and businesses. Among these businesses are ExxonMobil,[9] Telstra, WMC Resources, BHP Billiton, Phillip Morris,[10] Murray Irrigation Limited,[11] and Visy Industries.IPA donors have also included Clough Engineering, Caltex, Shell, and Esso.[2] Other donors were electricity and mining companies, as well as British American Tobacco (BAT).[2]"

If anyone is too lazy to research this, The executive director John Roskam worked on the Liberal federal campaign in 2001.

Bob Carter is their science policy advisor and has links to many worldwide climate denier organisations such as the ICSC and heartland who are all funded by industry.

Its blatant corruption and propaganda and should be outlawed. Every policy position is paid for by business... its not to help people or for the good of mankind, its about greed and deceit!

Those who constantly agree with the IPA should be ashamed of themselves.

JohnnieI:

23 Sep 2014 12:49:59pm

* Apple paid only $193 million tax on $27 billion in local sales.

* Glencore, paid almost zero tax over the past three years, despite income of $15 billion, as it radically reduced its tax exposure by taking large, unnecessarily expensive loans from its associates overseas.

JohnnieI:

23 Sep 2014 1:04:19pm

"Under the current law, it's almost impossible to find out how much tax multinational companies pay" - 'Glencore assures staff it is not dodging tax in Australia' ABC PM, 4/7/2014 (http://www.abc.net.au/pm/content/2014/s4039691.htm)

Only 2 to 4 percent funnelled off to tax havens? How would we know if it's all secretive?!

PDB:

23 Sep 2014 1:08:10pm

Another piece of IPA sophistry. If it doesn't erode the tax base, then why do they do it? I wouldnt invest significant time and money in hiring lawyers and accountants to do this work if it didn't provide a return. And in this case the company is gaining by paying less tax.

According to the ABC, apple paid 193 million in tax on an estimated 27 billion revenue, about a .7% tax rate. If they would have paid around a 15% tax rate, still below the standard corporate rate, the Australian people would of had a $4 billion to fund the infrastructure that Apple are using (an educated customer base, a universal health care system so they dont need provide health care, roads, police and an international trading, financial and legal system).

So when we are slashing services, lets thank the transnationals for their small benefits

MamabaDave:

23 Sep 2014 1:44:42pm

I agree about sophistry here. The writing's fine as an example of rhetoric but its factual base is weak. It seems to have trawled for evidence to support a pre-existing viewpoint instead of building conclusions based on all evidence and the associated reasoning. The writer is clearly at odds with the need for government revenue for healthcare, education and a sound justice system.

lilly:

23 Sep 2014 1:22:49pm

"At the end of the day, consumers and workers benefit when corporate tax rates are low and attractive."

This may be true to a point but I'm not convinced that the benefits to consumers are that great (if any). Most of the companies that Chris is talking about use profits to buy up smaller companies that have come up with good ideas. How often do you hear that Company X is cashed up and looking at making an acquistion.

In my experience, big companies tend to stagnate. There's no room to let people come up with or implement new ideas. Everyone is allocated their own little pigeon hole with their own tasks and are not allowed to migrate outside of that area. New ideas happen in little companies with people who have the courage to take relatively big risks.

Nacnud:

JamesH:

23 Sep 2014 1:59:40pm

I don't believe Hockey at all no matter what he comes out with. It is all to do with blaming Labor instead of blaming themselves from floundering the boats when it comes to the filthy rich multi nationals taxation dodgers. For that is how the L-NP get there cashflow from through dodgy bodgie book keeping debits and credits.

ScottBE:

Chris I value your opinion very highly. However, "at the end of the day" I for one am very concerned that big business is not "doing its share of the heavy lifting".

Our taxation system relies on all sources of revenue. The less paid by one sector means that governments have less resources available to manage the economy and to provide services.

How can the government reduce services and essential community supports and not address the revenue short-fall caused in part by huge amounts of tax being avoided? It doesn't stand critical assessment.

Laissez faire market regulation is necessary to remove much restriction and free up businesses to grow. But so does good sensible management which gathers the necessary taxes without strangling business.

But while Apple and others are avoiding their share of taxes, others in the economy are forced to cover the loss of that income stream.

Your argument does not stack up to my mind, but I will think on this further and try to understand the point you are making.

John in Sydney:

23 Sep 2014 2:45:58pm

This article should be nominated for "rubbish journalism of the year".The only beneficiaries of tax avoidance are the tax avoiders & as a result, everyone else subsidizes them.Tax should be paid in the country where the income is generated & not allowed to be moved around the world to the so-called tax havens.

GJA:

tim:

23 Sep 2014 3:42:54pm

Isn't it embarrassing when evidence is actually to the contrary? I'm not sure what agenda Chris has but this piece was not very well researched... After watching a summery by Dhammika Dharmapala on his paper, he explains why the metric of base erosion profit shifting is declining. He suggest that it is likely due to the Holdings company structure that are now being adopted by US multi-nationals. He justifies this claim by analysing the net income of MNC's in tax havens compared to their sales. He then compares this to data from the Netherlands that attracts a large number of Holdings structures. The data is very closely aligned. So he isn't saying that BEPS is declining. He's saying that the way we measure BEPS is no longer relevant and is out of date. The MNC's have identified new ways to hide their profits. Chris's commentary is misleading.

John51:

23 Sep 2014 4:15:01pm

This article is the most absurd far right ideological self serving clap trap that I have read. These multi-national corporations have been able to earn the wealth they are earning only because governments have given the right to operate within their economy. The price of that right is to pay their proper taxes.

That is what corporate taxation comes down to. You are given a right to operate as long as you pay a given tax on the profits that you make. In the old days, like with Al Capone, tax avoidance could mean you went to prison. You got a go to prison card and do not pass. And than they took your assets of you plus interest to pay what you owed. Maybe it is about time the G20 countries enforced that rule and did it a lot more often.

hoolibob:

23 Sep 2014 4:44:54pm

I think its great our treasurer is looking at tax avoidance. Why doesn't he start with family trusts that many of the polies, businesses & more affluent Aussies take advantage of. If his budget is about ensuring all Australians future prosperity there should be no need for these tax havens.

Stephen:

GrumpiSkeptic:

There was an article on The Drum about "National Interests". Yes, like James Hird of the Essendon fame said: "Whatever it takes...".

Governments will want to attract a company to set up shop there. Good for jobs. I believe our leaders often chant that mantra too...probably a bit too often, I reckon.

Lets say Ireland, or whatever country offers the lowest tax regime. I bet there will be many other countries going out of their way to offer an even better deal. "National Interests" again. Yes, these countries are able to sit down on a round table, even share a few glasses of the 1985 Grange. Talks and hand shakes. Plenty of photo opportunities to show the world that they are all on the same page. If anyone believes them, then I have a swamp land with ocean view going cheap !

As soon as the circus dissolved, everyone rushes back to ensure that no one is outdoing them in the tax "avoidance", yes, "AVOIDANCE" caper.

Of course it is good that Australia advocate tax avoidance by big multi-nationals. However, the last thing politicians wanted to see is companies moved away to a lower tax country. Of course, nations already have such "job creating" companies will hang on to them for as long as they can. So there will be more G20 talks. Big issue such as to ban or not to ban President Putin will be on the top of the agenda. More police, more cordoned off streets. More inconvenience to the residents and traffic.

Craig:

23 Sep 2014 6:17:40pm

I believe corporate tax revenue has risen simply because their takings have risen dramatically. Corporations like to be seen as people for certain legal convenience, yet as a percentage of their incomes they pay far less than their secretaries.This article is nothing more than a smoke screen.

EEL:

Firstly, tax avoidance shrinks the base of a tax, thus requiring a higher rate to raise the same amount of revenue. Doesn't this violate every principle of economically efficient taxation?

Secondly, while it is entirely fair and reasonable for a company to avoid a certain country because its tax rates are excessive, surely if they want to reap the benefits of doing business in that country, they should also pay the taxes expected of them.

Thirdly, if a company is not paying what is expected in tax, doesn't that amount to a hidden subsidy, an egregious form of rent-seeking? Doesn't that violate the author's free-market principles?

As an unashamed economic rationalist, I am frequently in agreement with the author. But as far as this article is concerned, I have not seen something more ludicrous in some time.

jonboy:

24 Sep 2014 3:40:09am

These public commentators are all funded by vested interests. Chris Berg is no different. It its silly to think that any commentary, timing, issues, etc from him and others like him - has anything to do with and impartial, educated, engaged and and interested Australians. Just vested interests (and serial trolls) - stirring the pot.

Fred:

24 Sep 2014 8:46:52am

Why would our politicians tackle tax avoidance, when they and their cronies are engaging in the same practices. Also at the end of their taxpayer funded political life they would like to slip into a cosy corporate job, while still receiving their parliamentary pensions (fully indexed for life).

Pete:

24 Sep 2014 1:21:04pm

This is the same argument one might use to say 'don't worry about Enron, it's only one company' or 'forget about terrorism, it doesn't affect us much, and it's only a tiny minority that do it'. Completely specious arguments. Apple and Google alone would contribute the equivalent of 100s of thousands of taxpayer's tax is they were unable to use shifty tax havens. Chris would agree that the principle should be: tax economic activity where it occurs. As an arch capitalist, it's odd he's defending something very different.